| Abstract: | The United States is moving with unexpected speed toward a sustainable energy system based on highly efficient energy use and appropriate renewable sources. The free market, though imperfect, is accomplishing the remarkably well. However, institutional barriers are causing underinvestment in money-saving energy options. This retards the energy transition far below an economically efficient rate, prolonging dependence on dwindling fuels.Each year, electric utilities spend about the same amount of money that efficiency and renewables are lacking—some $25 billion—to build giant power stations which cannot compete in the energy service market. This federally supported misallocation of capital is bankrupting the utilities and threatening the stability of the whole financial system. As long as half of America's energy investment goes into uneconomic power plants, their cheaper rivals will be smothered.If, however, utilities were to invest only in the best energy buys (as several states already mandate), power plants would no longer be built. This “least-cost test” should be coupled with a program of utility loans, properly structured on proven principles. Such loans would enable utility customers to buy any energy option that costs less than new power plants; give all energy users fair and equal access to capital; offer an escape from high energy bills; and rescue utilities from insolvency. Indeed, such a program would automatically transform the utilities from an obstacle into a vehicle for financing the transition to sustainability. The benefits of a secure, affordable, equitable, and environmentally benign energy system could then be achieved before the fossil-fuel bridge to it has been burned. Electric utilities' adaptation could also help guide other beleaguered institutions toward sustainability. |
